Unemployment Number Helps Boost Aussie Dollar Overnight

The break in the equity markets contributed to late session profit-taking in the AUD USD and NZD USD after strong rallies the past three days. Early Wednesday morning China reported that factory output increased but imports and exports fell.

The break in the equity markets contributed to late session profit-taking in the AUD USD and NZD USD after strong rallies the past three days. Early Wednesday morning China reported that factory output increased but imports and exports fell. This may have contributed to the weakness as both New Zealand and Australia are major trading partners. News that Australian unemployment came out just like economists forecast is helping to aid the rally in the Aussie this morning.

The U.S. Dollar recovered late in the afternoon after hitting a 15-month low against a basket of currencies early in the trading session on Wednesday. A break from the top in the equities markets triggered a short-covering rally. Concern that the demand for higher risk assets may be too strong is leading to the downside reaction in the other currencies.

The rally in the EUR USD failed just short of the recent top at 1.5062. Traders have been hesitant to maintain upside momentum each time it’s neared this level over the past few weeks. Fear that a move over this price may induce a stern warning or even stronger action from the European Central Bank may have triggered this adverse reaction by investors.

Comments from Bank of England Governor King regarding additional quantitative easing and a lower British Pound, attributed to the selling pressure on the GBP USD. Although the BoE believes the U.K. economy is beginning to recover, comments suggest that lower interest rates, government spending and quantitative easing may not be enough to maintain the recovery. King feels that additional measures may have to be taken because strength remains “highly uncertain”.

Oversold conditions are helping to contribute to the turnaround in the USD CHF and USD JPY. Yesterday’s intraday sell-off in the equity markets encouraged shorts in these two currency pairs to lighten up their positions.

With the stock market backing off its high and crude oil treading water, selling pressure hit the Canadian Dollar late in the afternoon but conditions turned bearish for the USD CAD once again into the close. Technical factors contributed to the short-covering rally after this currency pair reached a key retracement level at 1.0446. Regaining 1.0522 will put this currency pair in a serious position to rally further. Another push under 1.0446 could trigger a further decline to 1.0350.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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